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29 Apr 2013
Forex Flash: Near term bias for stronger Euro - BBH
FXstreet.com (Barcelona) - Marc Chandler, Global head of Currency Strategy at Brown Brothers Harriman´s near-term bias is for a stronger euro, but he notes that the price action itself has been poor.
Technically, he thinks that the euro has put in the first leg of the correction of its nearly 10-cent sell off from early February through early April and the first leg up stalled near $1.32, just shy of the 50% retracement objective (~$1.3230). He suspects there will be another leg up that can extend the recovery toward $1.3350.
He continues to note that the fundamental basis for this is a shift in the news stream. He writes, “For the past few years, the euro area moves from crisis to resolution to complacency. Since the (at least temporary) resolution of the Cypriot crisis, Europe appears to have moved into the complacency phase and this phase is often supportive of the euro. At the same time we suspect the market has gotten ahead of itself in terms of an ECB rate cut. We suspect that if the market is not disappointed, a sell-the-rumor, buy-the-fact, type of activity may be supportive of the euro even if the ECB does cut the refi rate.”
Technically, he thinks that the euro has put in the first leg of the correction of its nearly 10-cent sell off from early February through early April and the first leg up stalled near $1.32, just shy of the 50% retracement objective (~$1.3230). He suspects there will be another leg up that can extend the recovery toward $1.3350.
He continues to note that the fundamental basis for this is a shift in the news stream. He writes, “For the past few years, the euro area moves from crisis to resolution to complacency. Since the (at least temporary) resolution of the Cypriot crisis, Europe appears to have moved into the complacency phase and this phase is often supportive of the euro. At the same time we suspect the market has gotten ahead of itself in terms of an ECB rate cut. We suspect that if the market is not disappointed, a sell-the-rumor, buy-the-fact, type of activity may be supportive of the euro even if the ECB does cut the refi rate.”